Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Cautionary Statement Under the Private Securities Litigation Reform Act
This quarterly report on Form 10-Q, including the "Overview and Outlook" and the
"Liquidity and Capital Resources" sections of this Management's Discussion and
Analysis of Financial Condition and Results of Operations, contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These statements relate to, among other things, operating results
and are indicated by words or phrases such as "expects," "anticipates,"
"should," "will," and similar words or phrases. These statements are subject to
inherent uncertainties and risks that could cause actual results to differ
materially from those statements. The risks and uncertainties include, but are
not limited to, those risks and uncertainties identified under the heading "Risk
Factors" in item 1A of the Company's Annual Report on Form 10-K for the year
ended December 31, 2013, and information contained in subsequent reports filed
by IDEX with the Securities and Exchange Commission. Investors are cautioned not
to rely unduly on forward-looking statements when evaluating the information
presented here.

Overview and Outlook
IDEX is an applied solutions company specializing in fluid and metering
technologies, health and science technologies, and fire, safety and other
diversified products built to customers' specifications. IDEX's products are
sold in niche markets to a wide range of industries throughout the world.
Accordingly, IDEX's businesses are affected by levels of industrial activity and
economic conditions in the U.S. and in other countries where it does business
and by the relationship of the U.S. dollar to other currencies. Levels of
capacity utilization and capital spending in certain industries and overall
industrial activity are among the factors that influence the demand for IDEX's
products.
The Company has three reportable business segments: Fluid & Metering
Technologies, Health & Science Technologies and Fire & Safety/Diversified
Products. Within our three reportable segments, the Company maintains six
platforms, where we will invest in organic growth and acquisitions with a
strategic view towards a platform with the potential for at least $500 million
in revenue, and seven groups, where we will focus on organic growth and
strategic acquisitions. The Fluid & Metering Technologies segment contains the
Energy, Water (comprised of Water Services & Technology and Diaphragm & Dosing
Pump Technology), and Chemical, Food & Process platforms as well as the
Agricultural group (comprised of Banjo). The Health & Science Technologies
segment contains the IDEX Optics & Photonics, Scientific Fluidics and Material
Processing Technologies platforms, as well as the Sealing Solutions and the
Industrial (comprised of Micropump and Gast) groups. The Fire &
Safety/Diversified Products segment is comprised of the Dispensing, Rescue,
Band-It, and Fire Suppression groups. Each platform/group is comprised of one or
more of our 15 reporting units: five reporting units within Fluid & Metering
Technologies (Energy; Chemical, Food, & Process; Water Services & Technology;
Banjo; Diaphragm & Dosing Pump Technology); six reporting units within Health &
Science Technologies (IDEX Optics and Photonics; Scientific Fluidics; Material
Processing Technology; Sealing Solutions; Micropump; and Gast); and four
reporting units within Fire & Safety/Diversified Products (Dispensing, Rescue,
Band-It, and Fire Suppression).
The Fluid & Metering Technologies segment designs, produces and distributes
positive displacement pumps, flow meters, injectors, and other fluid-handling
pump modules and systems and provides flow monitoring and other services for the
food, chemical, general industrial, water and wastewater, agricultural and
energy industries.
The Health & Science Technologies segment designs, produces and distributes a
wide range of precision fluidics, rotary lobe pumps, centrifugal and positive
displacement pumps, roll compaction and drying systems used in beverage, food
processing, pharmaceutical and cosmetics, pneumatic components and sealing
solutions, very high precision, low-flow rate pumping solutions required in
analytical instrumentation, clinical diagnostics and drug discovery, high
performance molded and extruded, biocompatible medical devices and implantables,
air compressors used in medical, dental and industrial applications, optical
components and coatings for applications in the fields of scientific research,
defense, biotechnology, aerospace, telecommunications and electronics
manufacturing, laboratory and commercial equipment used in the production of
micro and nano scale materials, precision photonic solutions used in life
sciences, research and defense markets, and precision gear and peristaltic pump
technologies that meet exacting original equipment manufacturer specifications.
The Fire & Safety/Diversified Products segment produces firefighting pumps and
controls, rescue tools, lifting bags and other components and systems for the
fire and rescue industry, and engineered stainless steel banding and clamping
devices used in a variety of industrial and commercial applications, precision
equipment for dispensing, metering and mixing colorants and paints used in a
variety of retail and commercial businesses around the world.
Some of our key financial highlights for the three months ended June 30, 2014
are as follows:
• Sales of $546.7 million increased 5%; organic sales - excluding
acquisitions and foreign currency translation - were up 4%.

Table of Contents

• Operating income of $112.1 million increased 13%.

• Net income increased 15% to $71.8 million.

• Diluted EPS of $0.88 increased 12 cents, or 16%, compared to 2013.

Some of our key financial highlights for the six months ended June 30, 2014 are
as follows:
• Sales of $1,090.7 million increased 8%; organic sales - excluding
acquisitions and foreign currency translation - were up 6%.

• Operating income of $225.9 million increased 16%.

• Net income increased 18% to $146.3 million.

• Diluted EPS of $1.79 increased 30 cents, or 20%, compared to 2013.

Our projected third quarter 2014 diluted EPS is in the range of $0.83 to $0.85.
Given the Company's current outlook and the projection of 5-6% organic revenue
growth for the year, we have increased our full year EPS outlook; we now expect
full year 2014 diluted EPS of $3.50 to $3.55.

Results of Operations
The following is a discussion and analysis of our results of operations for the
three and six month periods ended June 30, 2014 and 2013. Segment operating
income excludes unallocated corporate operating expenses.
Management's primary measurements of segment performance are sales, operating
income, and operating margin. In addition, due to the highly acquisitive nature
of the Company, the determination of operating income includes amortization of
acquired intangible assets and, as a result, management reviews depreciation and
amortization as a percentage of sales. These measures are monitored by
management and significant changes in operating results versus current trends in
end markets and variances from forecasts are analyzed with segment management.
In this report, references to organic sales, a non-GAAP measure, refers to sales
from continuing operations calculated according to generally accepted accounting
principles in the United States but excludes (1) sales from acquired businesses
during the first twelve months of ownership and (2) the impact of foreign
currency translation. The portion of sales attributable to foreign currency
translation is calculated as the difference between (a) the period-to-period
change in organic sales and (b) the period-to-period change in organic sales
after applying prior period foreign exchange rates to the current year period.
Management believes that reporting organic sales provides useful information to
investors by helping identify underlying growth trends in our business and
facilitating easier comparisons of our revenue performance with prior and future
periods and to our peers. The Company excludes the effect of foreign currency
translation from organic sales because foreign currency translation is not under
management's control, is subject to volatility and can obscure underlying
business trends. The Company excludes the effect of acquisitions because the
nature, size, and number of acquisitions can vary dramatically from period to
period and between the Company and its peers and can also obscure underlying
business trends and make comparisons of long-term performance difficult. In
addition, this report references EBITDA. This non-GAAP measure has been
reconciled to Net income and Operating income in this Item 2 under the heading
"Non-GAAP Disclosures." Given the acquisitive nature of the Company, management
believes that EBITDA provides important information about the performance of the
Company's businesses by, among other matters, eliminating the impact of higher
amortization expense at recently acquired businesses.

Table of Contents

Consolidated Results in the Three Months Ended June 30, 2014 Compared with the

For the second quarter of 2014, Fluid & Metering Technologies contributed 41% of
sales, 44% of segment operating income and 43% of segment EBITDA; Health &
Science Technologies accounted for 34% of sales, 28% of segment operating income
and 31% of segment EBITDA; and Fire & Safety/Diversified Products represented
25% of sales, 28% of segment operating income and 26% of segment EBITDA.
Sales in the three months ended June 30, 2014 were $546.7 million, a 5% increase
from the comparable period last year. This increase reflects a 4% increase in
organic sales and 1% favorable foreign currency translation. Organic sales to
customers outside the U.S. represented approximately 50% of total sales in 2014
compared to 49% during the same period of 2013.
Gross profit of $241.1 million in the second quarter of 2014 increased $18.3
million, or 8%, from the same period in 2013. Gross margin of 44.1% in the
second quarter of 2014 increased from 43.0% during the same period in 2013. The
increase in gross margin is primarily due to volume leverage and productivity.
Selling, general and administrative expenses increased to $129.0 million in the
second quarter of 2014 from $123.3 million during the same period of 2013. The
change reflects an increase of approximately $.6 million for incremental costs
from the Aegis acquisition and an increase in volume related expenses of $5.1
million. As a percentage of SG&A expenses were 23.6% for the second quarter of
2014 and 23.8% for the same period of 2013.
Operating income of $112.1 million in the second quarter of 2014 was up from the
$99.6 million recorded during the same period in 2013, primarily reflecting an
increase in volume and improved productivity. Operating margin of 20.5% in the
second quarter of 2014 was up from 19.2% during the same period of 2013,
primarily due to volume leverage and productivity.
Other expense - net of $0.1 million in the second quarter of 2014 was down $0.4
million compared with the same period in 2013, primarily due to an increase in
investment income.
Interest expense of $10.4 million in the second quarter of 2014 was slightly
down from $10.6 million in 2013.
The provision for income taxes is based upon estimated annual tax rates for the
year applied to federal, state and foreign income. The provision for income
taxes of $29.8 million for the second quarter of 2014 increased compared to
$25.8 million recorded in the same period of 2013. The effective tax rate
increased slightly to 29.3% for the second quarter of 2014 compared to 29.2% in
the same period of 2013 due to the mix of global pre-tax income among
jurisdictions. Additionally, the current quarter tax rate was favorably impacted
by the enactment of state income tax laws and the comparable quarter tax rate in
the prior year was favorably impacted by settlements with taxing authorities.
Net income in the second quarter of 2014 of $71.8 million increased from $62.6
million during the same period of 2013. Diluted earnings per share in the second
quarter of 2014 of $0.88 increased $0.12, or 16%, compared with the same period
in 2013.

Sales of $226.1 million increased $0.6 million, or 0.3%, in the second quarter
of 2014 compared with the same period of 2013. This reflects a 2% decrease in
organic sales offset by a 1% increase from acquisitions (Aegis - April 2014) and
1% favorable foreign currency translation. In the second quarter of 2014,
organic sales increased 2% domestically and decreased 6% internationally
compared to the 2013 period. Organic sales to customers outside the U.S. were
approximately 42% of total segment sales during the second quarter of 2014,
compared with 44% during the same period in 2013.
Sales within our Energy platform increased in the second quarter of 2014
compared to the same period of 2013, due to the the long winter which increased
sales to LPG and refined fuel customers. Sales within our Chemical, Food &
Process platform decreased compared to the second quarter of 2013 due to large
chemical project delays. Sales within our Agriculture group improved on the
strength of new product introductions, partially offset by a decrease in farm
income. Diaphragm & Dosing Pump Technology platform sales decreased compared to
the second quarter of 2013 due to large project delays. Sales in our Water
Services & Technology group increased in the second quarter of 2014 compared to
the same period in 2013 based on steady demand in North America, Japan and
Europe, and continued ability to gain share.
Operating income and operating margin of $55.6 million and 24.6% respectively,
were lower than the $56.1 million and 24.9% recorded in the second quarter of
2013, due to acquisition related charges.

Sales of $185.7 million increased $4.8 million, or 3%, in the second quarter of
2014 compared with the same period in 2013. This reflects 1% organic revenue
growth and 2% favorable foreign currency translation. In the second quarter of
2014, organic sales were flat domestically and increased 2% internationally.
Organic sales to customers outside the U.S. were approximately 54% of total
segment sales in the second quarter of 2014 compared with 50% during the same
period in 2013.
Sales within our Material Processing Technologies platform increased compared to
the second quarter of 2013 due to large pharmaceutical and industrial shipments,
primarily in the North American and Asian markets. Sales within our Scientific
Fluidics platform increased compared to the second quarter of 2013 due to the
success of new product introductions and the strength of the in vitro
diagnostics market. Sales within the Sealing Solutions group decreased compared
to the second quarter of 2013 due t

Table of Contents

o a slowdown in its North American end markets and negative impact from foreign
currency. Sales within our Optics and Photonics platform increased compared to
the second quarter of 2013 due to renewed strength in the semiconductor and life
sciences markets. Sales within our Industrial group increased compared to the
second quarter of 2013 due to continued growth in North American distributor
sales and our team's ability to expand markets served.
Operating income and operating margin of $36.1 million and 19.5%, respectively,
in the second quarter of 2014 were up from the $34.5 million and 19.1% recorded
in the same period of 2013, primarily due to increased volume and productivity
initiatives.

Sales of $136.2 million increased $21.9 million, or 19%, in the second quarter
of 2014 compared with the same period in 2013. This reflects 17% organic growth
and 2% favorable foreign currency translation. In the second quarter of 2014,
organic sales increased 17% both domestically and internationally, year over
year. Organic sales to customers outside the U.S. were approximately 57% of
total segment sales in the second quarter of 2014 and 2013.
Sales within our Dispensing group increased compared to the second quarter of
2013 due to strong Western European markets and new product sales into Asia.
Sales within our Band-It group increased compared to the second quarter of 2013
due to an increase in automotive sales and strong distribution sales in Europe
and North America. Sales within our Fire Suppression group increased due to
demand for power facility trailers and strong project orders from China. Sales
within our Rescue group decreased compared to the second quarter of 2013 due to
weakness in Asian markets, partially offset by large project shipments.
Operating income and operating margin of $36.0 million and 26.4%, respectively,
in the second quarter of 2014 were higher than the $23.7 million and 20.7%
recorded in the second quarter of 2013, primarily due to volume leverage and
productivity initiatives, as well as a prior year charge associated with a
facility disposal in 2013.
Consolidated Results in the Six Months Ended June 30, 2014 Compared with the

For the first six months of 2014, Fluid & Metering Technologies contributed 41%
of sales, 43% of segment operating income and 42% of segment EBITDA; Health &
Science Technologies accounted for 34% of sales, 28% of segment operating income

Table of Contents

and 31% of segment EBITDA; and Fire & Safety/Diversified Products represented
25% of sales, 29% of segment operating income and 27% of segment EBITDA.
Sales in the six months ended June 30, 2014 were $1,090.7 million, an 8%
increase from the comparable period last year. This increase reflects an 6%
increase in organic sales, a 1% increase from acquisitions (FTL - March 2013 and
Aegis - April 2014) and 1% favorable foreign currency translation. Organic sales
to customers outside the U.S. represented approximately 48% of total sales in
2014 compared to 51% during the same period of 2013.
Gross profit of $485.6 million in the first six months of 2014 increased $50.7
million, or 12%, from the same period in 2013. Gross margin of 44.5% in the
first six months of 2014 increased from 42.9% during the same period in 2013.
The increase in gross margin primarily resulted from an increase in volume and
benefits from the Company's structural cost actions taken in prior years.
Selling, general and administrative expenses increased to $259.6 million in the
first six months of 2014 from $240.6 million during the same period of 2013. The
change reflects an increase of approximately $1.8 million for incremental costs
from the FTL and Aegis acquisitions and an increase in volume related expenses
of $17.2 million. As a percentage of sales, SG&A expenses were 23.8% for the
first six months of 2014 and 2013.
Operating income of $225.9 million in the first six months of 2014 was up from
the $194.3 million recorded during the same period in 2013, primarily reflecting
an increase in volume and improved productivity. Operating margin of 20.7% in
the first six months of 2014 was up from 19.2% during the same period of 2013,
primarily due to volume leverage, productivity, and conversion of a large
Dispensing order.
The provision for income taxes is based upon estimated annual tax rates for the
year applied to federal, state and foreign income. The provision for income
taxes of $59.4 million for the first six months of 2014 increased compared to
$50.0 million recorded in the same period of 2013. The effective tax rate
increased to 28.9% for the first six months of 2014 compared to 28.7% in the
same period of 2013 due to the mix of global pre-tax income among jurisdictions.
Additionally, the effective tax rate for the first six months of 2014 is higher
than the same period in the prior year due to the lapsing of the U.S. R&D credit
which expired at the end of 2013.
Net income in the first six months of 2014 of $146.3 million increased from
$123.9 million during the same period of 2013. Diluted earnings per share in the
first six months of 2014 of $1.79 increased $0.30, or 20%, compared with the
same period in 2013.

Sales of $449.5 million increased $12.2 million, or 3%, in the first six months
of 2014 compared with the same period of 2013. This reflects a 2% increase in
organic sales and 1% favorable foreign currency translation. In the first six
months of 2014, organic sales increased 6% domestically but decreased 4%
internationally compared to the 2013 period. Organic sales to customers outside
the U.S. were approximately 42% of total segment sales during the first six
months of 2014 compared with 45% in 2013.
Sales within our Energy platform increased in the first six months of 2014
compared to the same period of 2013, due to the long winter driving larger than
anticipated LPG and refined fuel consumption, the strength of OEM truck builds,
and North American electronic retrofits. Sales within our Chemical, Food &
Process platform increased compared to the first six months of 2013 based on
stable industrial demand, offset by expected delays in large chemical projects.
Sales within our Agriculture group improved due to the strength of new product
introductions, partially offset by the extended winter. Diaphragm & Dosing Pump
. . .